Expatriate life is unpredictable, and almost always expensive. With the recent trouble in the money markets and the introduction of the new European Single Currency, the next few years are likely to be turbulent, even in France. With a generous expatriate salary, it is easy to sit back and think, "Well, whatever happens I should be OK." No-one can afford to be blasť, and no-one can afford to leave their financial affairs unplanned. Planning properly is hard work, and it takes a lot of time.
The essence of good financial planning is balance, and there are many factors to consider. Your money has to work as hard as possible for you, giving you as much return as it can. In general, though, higher returns mean higher risks. So a good financial plan finds the point where your funds grow as much as possible, at the level of risk you feel comfortable with.
The other major question is liquidity. How soon will you need to get hold of your money? Will you be able to maintain your standard of living if you suddenly have to look for another job? Can you afford to lock away large sums for your retirement? When do you want to retire, and where? How about sending the children to college?
To help you answer these questions, many people employ the services of a professional financial advisor. It pays to be careful, as there is a lot of inappropriate advice around. The regulation of the UK financial services industry is a welcome improvement. As a rule, good advice should cost no more than one percent of the annual value of your assets. It is vital to review your situation regularly, to see whether your provisions still meet your needs.
We cannot, alas, answer these questions for you, but in the following pages we present a comprehensive survey of the tools available to expatriates in France to build the financial future that they want.
Investing in France
Although most French banks do not pay interest on checking accounts, you can transfer money into funds organised for investment purposes. These range from deposit and high-interest fixed-term accounts to the bank's own unit trusts and managed mutual funds. There are many options for investors, but most French investment products don't offer high yield, and you may be better off keeping your investments in your home country.
Basing your money in France is only a good idea if you plan to stay in the country long-term. There is also the possibly of placing money offshore, to reduce your tax liabilities.
An 'Offshore' account is basically one which is held in a jurisdiction where non-resident investors pay little or no tax on income from their investments. Although Jersey, Guernsey and the Isle of Man have monetary union with the pound sterling, they are independent political entities, outside the controls of the EU. They are also politically stable, and relatively close to France, which is convenient if you wish to visit the people who will be looking after your money. Luxembourg also offers tax advantages for overseas investors.
"At first, I was very nervous about putting my money offshore," says Mrs Gillespie. She has lived in Paris, for nearly ten years, and she opened an offshore account in Jersey six months ago. "I thought that offshore accounts were something to be suspicious of, for criminals, basically. But I was surprised how friendly the staff at the bank were- I spent nearly half an hour on the phone to them, they explained all the advantages and pitfalls of banking offshore. Then I decided to go to Jersey to see for myself."
An offshore account is basically of interest to expatriates with over about £1000 ($1500) to invest. If you are already resident in France for tax purposes, you may be advised against holding money offshore. Likewise, if you intend to settle in France permanently, offshore accounts may not be the ideal solution.
It is always important to get good financial advice, but it is especially important if you are moving money offshore. "As an expatriate investing your money offshore," explains Mrs. Gillespie's husband, Jon, "you need to be au fait with three different systems, your home country, the place you live, and the offshore centre. No job for an amateur."
Most of the financial institutions are delighted to give in-depth advice to potential clients, often over the telephone. Banque Transatlantique has great experience in this matter thanks to its subsidiary in Jersey.
If you have an offshore account in Jersey then you do not have to pay tax in Jersey. However, you do have to inform the tax authorities where you live of any income you receive.
Jersey (and Guernsey) offer attractively low tax rates for investors. In Jersey, trusts for non-residents are exempt from income tax on overseas income and on bank deposit interest arising on the island. "The Island's tax rate has remained unchanged since 1940 and this stability is supported for the future by political commitment," says the President of Jersey's Finance and Economics Committee. The Labour government has made noises about re-assessing the tax regimes of the off-shore islands, but this would be so difficult to do that no-one on the island is seriously worried.
Jersey is a little island off the shore of France. Formerly part of the Duchy of Normandy, it became subject to the British crown with the Norman conquest of 1066, and has remained so ever since. It is governed by an elected body known as the States, where all members are elected as individuals rather than members of a political party. Policy is conservative, and focused on stability.
If time and money are in plentiful supply, it might be worth visiting the island, which has quite a reputation as a tourist centre as well as a tax haven. It takes 55 minutes to get there from Paris, and flights from London are also available. The island is accessible by car and ferry, from St. Malo, on the Brittany coast.
The Isle of Man
In the past, the Isle of Man has been overshadowed as a financial centre by the Channel Islands. It is only recently that the island has come into its own. Over the last decade, almost every well-known British financial institution has opened a branch here. The authorities have done what is necessary to instill security and confidentiality. With rigorous guidelines to prevent the island being used as a money laundrette, financial institutions have been granted, in return, the right to maintain secrecy about their customers accounts. Deposits made with a licensed banking institution on the Isle of Man are covered by the Depositors' Compensation Scheme contained in the Banking Business (Compensation of Depositors) Regulations 1991. The compensation represents 75 percent of the institution's total liability to you. The maximum compensation to any one person is £15,000.
One advantage of the relatively late development of the Isle of Man as
an offshore financial centre is the friendliness of the people working in the financial sector (and elsewhere on the island). Modest deposits are welcome here and even the smaller customers get individual attention.
There are daily flights to the island from Manchester, Liverpool and London Heathrow. The city of Douglas where all the financial institutions are based, within easy distance of one another, is 10 minutes by taxi from the airport. The island is more difficult to get to from France than the Channel Islands, but if you want to make a deposit, a visit isn't necessary.